Advice on a family matter please!

[Mitch1]

Almost 2 years ago my husbands NZ parents decided to build a house more suited to their age requirements. It is a small 2 bed house on a reasonable sized block and would only suit a certain market. Ideal for a retirement couple but in a large estate suited to young families.
They approached us and asked for help funding the build while they lived in their other home. We transferred approx 270k and paid a solicitor to set it up as a loan so they would not be hit for income tax as apparently this is what would have happened. We also lost several thousand in the awful exchange rate at the time.
When they paid it back we decided not to transfer the funds again as the rate was still awful so bought 2 good blocks side by side in the same estate in both our names. We have been asked a couple of times by large house and land builders to sell to them. These blocks are now worth approx 300k, bought for 250k so covered the exchange loss, plus a bit.

His parents have now asked if we would buy their house outright from them so they can live off the funds.
How do we go about this so that the transaction doesn't end up costing us a packet again? (His folks didn't consider the currency exchange so I doubt they will consider cap. Gains, stamp duty, legals etc either which we would have to declare here) I have no idea if these all apply either as I am not familiar with NZ rules and how they affect us here! It would be great to find an efficient way to do this, especially as one of the reasons is that they have run short due to helping out his sibling on a regular basis, so we do want to help them.

 

[Kinnon Bell]

Is there a reason why you have to buy the property and your inlaws can't put it on the market?

 

[D.T.]

Is there a reason why you have to buy the property and your inlaws can't put it on the market?

Presumably because they want to rent it back and other purchases may not be keen on that.

 

[Terry_w]

Almost 2 years ago my husbands NZ parents decided to build a house more suited to their age requirements. It is a small 2 bed house on a reasonable sized block and would only suit a certain market. Ideal for a retirement couple but in a large estate suited to young families.
They approached us and asked for help funding the build while they lived in their other home. We transferred approx 270k and paid a solicitor to set it up as a loan so they would not be hit for income tax as apparently this is what would have happened. We also lost several thousand in the awful exchange rate at the time.
When they paid it back we decided not to transfer the funds again as the rate was still awful so bought 2 good blocks side by side in the same estate in both our names. We have been asked a couple of times by large house and land builders to sell to them. These blocks are now worth approx 300k, bought for 250k so covered the exchange loss, plus a bit.

His parents have now asked if we would buy their house outright from them so they can live off the funds.
How do we go about this so that the transaction doesn't end up costing us a packet again? (His folks didn't consider the currency exchange so I doubt they will consider cap. Gains, stamp duty, legals etc either which we would have to declare here) I have no idea if these all apply either as I am not familiar with NZ rules and how they affect us here! It would be great to find an efficient way to do this, especially as one of the reasons is that they have run short due to helping out his sibling on a regular basis, so we do want to help them.

why not just borrow against the 2 blocks and put no cash into deal?

 

[Mitch1]

Presumably because they want to rent it back and other purchases may not be keen on that.

Spot on D.T., only problem is I do not think they are considering paying us rent, the fact that their take on it is we sell our blocks in exchange for their home and carry on as before, no rent mentioned after all, we aren't getting rent for the empty blocks - but own equivalent value. (Easier to sell blocks than their house down the road though, but that won't cross their minds, they are not investor minded)

Keese, they won't put it on the market because they need to live in it and put a lot of time and effort I to making it as maintenance free, suitable for their living requirements, as possible.

Terry, if we borrow against the blocks to free up the cash for them, we pay holding costs on the mortgage, I expect a chunk of cash will go to the sibling they have assisted many times in the past and when it comes to willing the property the Christian approach for them would be to leave it to the child who 'needs' it...

Apologies for delayed response, few phone calls in a row came in!

 

[Perp]

Terry, if we borrow against the blocks to free up the cash for them, we pay holding costs on the mortgage, I expect a chunk of cash will go to the sibling they have assisted many times in the past and when it comes to willing the property the Christian approach for them would be to leave it to the child who 'needs' it...

What does your husband think about this? Why are you inclined to help such people, who obviously have little concern for you and your husband?

 

[INVSTOR]

I have an inlaw like that also that wanted us to take out a personal loan to prop up her lifestyle. It led to a bit of a family feud when I refused and she took back money she gave to my kids when they were born. I feel it is selfish for them to ask.

 

[Mitch1]

What does your husband think about this? Why are you inclined to help such people, who obviously have little concern for you and your husband?

My husband wants to do it because he does not want to see his folks short in their retirement years when they really struggled to put him through private schooling/uni etc he feels it is his turn to give back now. It would P*** him off if it all went to help sibling again though! But he will not see his folks stuck and if the tables were turned I wouldn't want to see mine stuck either TBH. So I support the emotional reasons.

Just looking for a way to do this as easily as we can, we know we will lose out but if we can minimise that, I would like to know the best approach. They are not out to 'do' us but they are not savvy enough to realise what we are up for either. We are not looking to profit from this and they just want to stop worrying about financing their retirement.

 

[Mitch1]

I have an inlaw like that also that wanted us to take out a personal loan to prop up her lifestyle. It led to a bit of a family feud when I refused and she took back money she gave to my kids when they were born. I feel it is selfish for them to ask.

Yeah, I can't see this being simple either. I suspect his folks won't want to tell his sister if we buy the house from them, which would leave us explaining it at the end and won't turn out well but he is not v close to her and he is more concerned with looking after his folks then fall out after they have gone.

Saying no will not be an option from his point of view and I will stand by him on that decision purely because if the shoe was on the other foot, I would want us to do the same. No matter what, we will lose out, be it financially, family connections etc it's going to be a hard one keeping everyone happy, impossible, most likely!

 

[Perp]

My husband wants to do it because he does not want to see his folks short in their retirement years when they really struggled to put him through private schooling/uni etc he feels it is his turn to give back now. It would P*** him off if it all went to help sibling again though! But he will not see his folks stuck and if the tables were turned I wouldn't want to see mine stuck either TBH. So I support the emotional reasons.

Just looking for a way to do this as easily as we can, we know we will lose out but if we can minimise that, I would like to know the best approach. They are not out to 'do' us but they are not savvy enough to realise what we are up for either. We are not looking to profit from this and they just want to stop worrying about financing their retirement.

I'd point out to your husband that he *has* helped his parents, by lending them the money. Parents are *supposed* to give their kids a start in life; it's not done on the expectation of "repayment". But I do understand that nobody wants to see their parents in difficult circumstances. It's hard for me to relate to, because none of my relatives would consider asking such a thing. (Fortunately.)

How old are the parents? Do they get a pension or any superannuation? Do they own this new house outright? If so, can they get a reverse mortgage? They're designed precisely for asset-rich, cash-poor retirees.

Does the sibling have an addiction problem? If so, maybe you can impose some "tough love" that the parents perhaps don't have the strength to enact themselves. e.g. "We'll do this, but only if you promise not to let sibling live with you / don't give sibling money / (whatever restriction is appropriate)". That way you'd be minimising your future commitment (by not having to support the parents more after they give the sibling money), and helping both the parents and the sibling. Obviously this only works if you trust the parents to stick to their commitment not to give the sibling money (or whatever).

 

[neK]

And if this was your parents?
Money isnt everything.

Money can't buy happiness but it can bring saddness.

That said, money can make life easier and sometimes thats all it takes to make life easier and hence bring happiness.

 

[Mitch1]

How old are the parents? Do they get a pension or any superannuation? Do they own this new house outright? If so, can they get a reverse mortgage? They're designed precisely for asset-rich, cash-poor retirees.

Perp, I honestly do not know about their financial situation. It is most likely they own the house outright and are on a pension. Sibling has No addiction issues. She is married with kids, but they have had endless bad luck, they owned a gas station, one of the tanks had a leak, turns out insurance didn't cover them and it sent them under. Her hubby's dad owned a farm that he managed for him for years, brought in all the contacts etc his dad died and left it all to brother, a city guy, who on sold it. Bad blood there now but he then had no job no income etc. they have made some poor decisions and had a lot of bad luck, mostly down to poor mgt and not savvy enough.
She then had cancer and both of his parents have had cancer. His Dad only recently (bowel) they have no private health care, gave it up a few years back.

I am thinking the least contentious way to do this may be just to suck it up, leave our blocks there and buy into 50% of the house! leaving the other for the other!
But I will see what the reverse mortgage options are, it sounds far easier, thank you!

 

[Perp]

Sounds really complicated, I don't envy you, Mitch1.

I know nothing about this company other than that I found them on google, and it's evidence that reverse mortgages do exist in NZ: Sentinel

 

[Mitch1]

And if this was your parents?
Money isnt everything.

Money can't buy happiness but it can bring saddness.

That said, money can make life easier and sometimes thats all it takes to make life easier and hence bring happiness.

Thanks neK, you are summing up the angle we are approaching this from, but we still want to protect our exposure to loss on it and know the right people are benefitting. (Though we know there cannot be a garentee with that either)

Oh dear, one of those black and white birds has just flown in the house and is crashing against the windows.... An omen perhaps? I would like it to a magpie... One for sorrow, 2 for joy and all that!!

 

[INVSTOR]

Yeah, I can't see this being simple either. I suspect his folks won't want to tell his sister if we buy the house from them, which would leave us explaining it at the end and won't turn out well but he is not v close to her and he is more concerned with looking after his folks then fall out after they have gone.

Saying no will not be an option from his point of view and I will stand by him on that decision purely because if the shoe was on the other foot, I would want us to do the same. No matter what, we will lose out, be it financially, family connections etc it's going to be a hard one keeping everyone happy, impossible, most likely!

It is difficult. I guess my situation was a little different though as my husband paid my inlaw's bills for the previous 20 years and I thought it was time for her to stop taking. The money from my kids was only a couple of thousand dollars, and after she took it from us she leant it to hubby's sister. My biggest concern with taking out a personal loan for a family member is how it would affect us.
How long do you think you will be in this situation for? 20 years? What if one or both parents need nursing home facilities or other care? Who will pay if the money is all spent. Will you still be able to provide good education for your kids?
I don't know your situation but there is a lot you need to consider.
My husband was unemployed for about 8- 9 months a couple of years ago. Things were tough enough. I was scrapping together loose change to buy food, going without food until next pay day and sold my car to get by. If we had the extra loan it would have been even worse!
Have a really good think about it! I think some people don't have much money sense and see others as really well off without even understanding their situation.
My situation happened 5 years ago and my husband now agrees that I was right.

 

[Mitch1]

Investor, that is a really good point about the nursing home care. I am really going to have to put some thought into this and cover the long term aspect which hubby won't do.
While we can help them now, would we be in a position to in the future?? Hubby is on a new 3 year contract (no pension) we have no super and are applying for DA on a small unit build to fund our own retirement, this would eat into our funds for this investment if we don't sell the blocks in NZ... Methinks I better look at this from a lot more angles and the future! Though D.H. Will think I am being materialistic
Not much comfort having him tell me I am right many years down the track! Thank you for sharing your own experience.

 

[INVSTOR]

My in-law looked Into reverse mortgages also. Apparently it wasn't very good for an average property if you had a lOng life-span. More suited to $1,000,000 plus houses so make sure someone with financial sense has a good read.

 

[Mitch1]

Sounds really complicated, I don't envy you, Mitch1.

I know nothing about this company other than that I found them on google, and it's evidence that reverse mortgages do exist in NZ: Sentinel

Getting more complicated as each post comes in... I really need to think on this so much more than I am doing! I had a quick look and from what I can see they can only borrow about 25% they never have to repay if they choose not to but approx 8% variable rate, accumulating obviously! Legals, valuations etc that they will not be up to doing, while we could probs look into it for them we might as well tell them we don't want to help them because they won't see it as help I think!

 

[INVSTOR]

Investor, that is a really good point about the nursing home care. I am really going to have to put some thought into this and cover the long term aspect which hubby won't do.
While we can help them now, would we be in a position to in the future?? Hubby is on a new 3 year contract (no pension) we have no super and are applying for DA on a small unit build to fund our own retirement, this would eat into our funds for this investment if we don't sell the blocks in NZ... Methinks I better look at this from a lot more angles and the future! Though D.H. Will think I am being materialistic
Not much comfort having him tell me I am right many years down the track! Thank you for sharing your own experience.

Yes, I got accused of being materialistic and all sorts of other things, oh well. Maybe you should contact a bank now and see if you would get development finance for you your retirement project with no income coming in for the rental property if you purchased the in-laws house.

 

[Tonibell]

In a similar situation we just had the parents get a reverse mortgage on the property.

While they have assets they should try to support themselves - rather than trying to leave an inheritance.